The Local Economy Solution

For five years I was the owner of Genesis Computers in Bloomington. I wasn’t a great businessman, but I understand some of the difficulties and challenges in running a small business.

The best kind of business for economic development, the best kind of business for resilience, with businesses that are competitive, the evidence is absolutely clear that locally owned businesses and local self-reliance is the ticket to prosperity in this country.

Half of the US economy is local small business along with half the jobs, yet, virtually all of the economic development investment subsidies have been for non-local businesses. It’s remarkable how well small business has done despite the best efforts of public policy to kill them. I’d like to see that change.

Most of the focus on community development has centered on “ATTRACT AND RETAIN” policies. Yet, you cannot attract a local business and if you have to pay a corporate welfare bribe to attract or keep them, then how local are they anyway. We need a different approach that develops our local businesses.

When it comes to economic development, we don’t have an unlimited budget and unlimited time. Every dollar we spend on a pointless attraction or retention is a dollar that is not spent nurturing our local self-reliance. Every hour spent attracting business outside our communities is an hour not spent working shoulder to shoulder with our local businesses. My responsibility as a civil servant is to get the most impact for the least cost. It is clear to me that supporting local business is going to be the most effective way of promoting local prosperity.

Locally owned businesses spend more of their money locally and thereby pump up the local economic multiplier effect. An analysis in 2002 demonstrated that locally owned merchants generate more than three times the local economic activity of their competitor chain stores on equal revenue. Buying the same book at the same price at the local bookseller the community got three times the jobs, three times the income and wealth effects, three times the tax collections, and three times the charitable contributions. In study after study, when you spend at a locally owned enterprise you get two to four times the jobs and other economic development impacts as you would get at non-locally owned businesses. Significantly, there has not been a study to show otherwise.

The strongest and most prosperous communities, number one, maximize the local ownership of business and two, maximize local self-reliance. The mistake of economic development is the assertion that if you could just focus on the global side of the picture the local side takes care of itself. In fact, it works in exactly the opposite direction. When you focus on local businesses and nurture them and grow them many of them will naturally start looking to global markets and they won’t need subsidies to get there.

Let’s Get Growing - Support your local Minnesota businesses.

How to Nurture Local Business?

Economic Leakage Analysis—let’s plug up our economic leakage through import substitution. I propose that Minnesota do a community by community leakage analysis, starting with the poorest communities, identifying all those things in the local economy where people are unnecessarily buying outside goods and services. Those unnecessary imports represent money leaking out of your economy. If we can plug those leaks with new import substituting business we can grow the economy and pump up the local multiplier. (For example: Instead of exporting our dollars to oil, gas, and coal producers outside Minnesota, we could substitute renewable energy and keep that money in Minnesota.)

Support Entrepreneurs: How can we support a new generation of local entrepreneurs?

Harness Local Investment: How can we bring capital into local business? How about keeping your money in a local bank or credit union which on average give 56 percent of their loans to local businesses, while big banks only give 18 percent? How about MNVest? What’s MNVest? MNVest is crowdfunding that allows any resident of the state to invest up to $10,000 per person per offering in local businesses. Of course, investing in securities can be risky, so buyer beware, but many Minnesotans invest in non-local securities on Wall Street, but invest nothing in the other half of the economy located in Minnesota and the returns are higher. I’d like to see that change. (See www.mnvest.org )

Creating Networks – How do we create networks of local business that are more competitive together than they would be just competing against one another. Collectively buying products and equipment they use regularly to reduce their costs through collaboration.

Buy Local – We need to spearhead “local first” campaigns. Economic developers need to ask, “How do you get more consumers to purchase more items locally more of the time?”

Public Policy - What is needed most by public policy is coordination. From the perspective of entrepreneurs, they see an alphabet soup of organizations out there and they don’t know how to navigate them. So we need to create a coordinated infrastructure for them so people know where to go to meet their needs.

As I see it, local bands have done more to promote so many of our great causes, without pay, and from the goodness of their hearts. I feel beholden to say, "Now get out there, support and enjoy some live, local music." Especially at a local establishment.